Carbon Premium: Is It There?

63 Pages Posted: 8 Dec 2022 Last revised: 11 Mar 2023

Multiple version iconThere are 3 versions of this paper

Date Written: November 1, 2022


The carbon premium refers to the excess return associated with brown firms and is
the focus of several recent influential studies. This paper finds negative excess return
associated with carbon intensities but no excess return associated with total carbon
emissions and emission growth in the U.S. Internationally, the carbon excess return is
zero on average and is lower in countries with stronger climate taste shocks during the
transition, such as sustainable flows and climate concerns. The inference differs from
previous studies because I relate stock returns to lagged carbon measures available to
investors instead of contemporaneous ones nonparametrically.

Keywords: Carbon emissions, climate change, predictability, stock returns

JEL Classification: G10, G12, G15

Suggested Citation

Zhang, Shaojun, Carbon Premium: Is It There? (November 1, 2022). Available at SSRN: or

Shaojun Zhang (Contact Author)

The Ohio State University

2100 Neil Avenue
Columbus, OH 43210-1144
United States


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